New York City Hospitals In $3 Million Settlement -- Schneiderman, Bharara, Say

Three hospitals in the Mount Sinai Health System are paying a total of $2.95 million to resolve allegations that the hospitals knowingly retained over $844,000 in overpayments made by Medicaid in violation of the federal and New York False Claims Acts, the New York State Attorney General and U.S. Attorney for the Southern District of New York have announced.

Knowing retention of an overpayment from the government for more than sixty days is known as a “reverse false claim” and is a violation of both federal and state false claim acts. The entities involved include Mount Sinai Beth Israel (“Beth Israel”) (formerly Beth Israel Medical Center), Mount Sinai St. Luke’s (“St. Luke’s”) (formerly St. Luke’s Hospital) and Mount Sinai Roosevelt (“Roosevelt”) (formerly Roosevelt Hospital) (together, the “Hospitals”) – and the Hospitals’ former partnership group, Continuum Health Partners, Inc. (“Continuum,” and together with the Hospitals, “Defendants”). The Mount Sinai Health System was formed in September 2013, when Continuum Health Partners combined the Hospitals’ operations with those of Mount Sinai Medical Center. New York State’s share of the settlement is over $1.7 million.

“Repaying Medicaid for false claims is not only vital to the integrity of the program, but it is also the law,” Attorney General Eric T. Schneiderman, said. “We will not allow hospitals to drain important resources from the system, and will continue to ensure that the program is properly reimbursed for the funds that it is owed.”

“My office’s audits first revealed the computer problem causing improper Medicaid claims, leading to today’s settlement in this case,” State Comptroller Thomas P. DiNapoli said. “Taxpayers should not have to foot the bill for waste, fraud and abuse of Medicaid. We will continue to partner with Attorney General Schneiderman in rooting out corruption in the Medicaid system.”

Medicaid is a jointly funded federal-state program that provides health care to needy individuals. Pursuant to Medicaid regulations, the Hospitals were only entitled to receive payment for services rendered to Medicaid managed-care patients from their contracted managed care organization, and were not permitted to seek additional payments from Medicaid or, with certain limited exceptions, the patients. The settlements resolve allegations in complaints filed by the State and United States in federal court that, as early as February 2011, Defendants became aware that they had wrongly billed Medicaid as a secondary payor for over $844,000 worth of claims in 2009 and 2010, and that Defendants knowingly avoided fully reimbursing Medicaid for those payments until March 2013.

As part of the settlements, Defendants admitted that, beginning in 2009 due to a software compatibility issue, a coding error caused Defendants to submit claims for payment above and beyond what they had received from the managed care organization, and that Medicaid paid these claims as a secondary payor. In September 2010, the New York Office of the State Comptroller brought to Continuum’s attention a small number of these claims, and Defendants admitted that in late 2010 they were made aware of the coding error. Defendants admitted that in late 2010 and January 2011, Continuum employees gathered and analyzed Continuum’s billing data in order to discover possibly affected claims, and that on February 4, 2011, an employee (and the whistleblower in this case) sent an email to certain members of Continuum’s management, attaching a spreadsheet containing 890 claims, of which 444 had been erroneously billed to Medicaid.

Continuum terminated the employee four days later, on February 8, 2011. Continuum reimbursed Medicaid in February 2011 for only five of the improperly submitted claims. Defendants admitted that Continuum never brought the employee’s analysis to the attention of government regulators. Thereafter, Defendants did not fully reimburse Medicaid for claims erroneously billed to Medicaid for over two years, and did so in more than thirty tranches after February 2011, beginning in April 2011 and concluding in March 2013.

This investigation was initiated after a whistleblower filed a lawsuit under the qui tam provisions of the federal and New York False Claims Acts, which allow private persons, known as “relators,” to file civil actions on behalf of the government and share in any recovery. The relator in this case will receive from the State a $354,000 share of the settlement proceeds after full payment by Defendants.

The investigation and settlement were the result of a coordinated effort between the office of the U.S. Attorney for the Southern District of New York, Preet Bharara, and the New York State Attorney General’s Office. Attorney General Schneiderman would like to the Office of the New York State Comptroller for its assistance in the matter.